10 Ways to Improve Your Retirement Plan and Retire With More Confidence

A retirement plan is not something you build once and then accept forever.

Your income changes. Your savings grow. Investment markets move. Your spending evolves. Taxes change. Your retirement date may move. Pensions and government benefits become more certain. Your housing plans may change.

All of these changes can affect whether your retirement plan is on track.

The good news is that a retirement plan usually has more than one lever you can adjust.

You may be able to save more, spend less, work longer, earn more, change your investment strategy, improve your tax strategy, change when you take retirement income or adjust your housing plans.

The objective is not necessarily to accumulate the largest possible portfolio. The objective is to create a retirement plan that can support the life you want while giving you a reasonable level of confidence that your money can last.

In this article, we will look at 10 ways to improve your retirement plan and explain why each one matters.

Why Improve Your Retirement Plan?

It is easy to look at a retirement projection and think of the result as either a success or a failure.

But retirement planning is rarely that simple.

Suppose your projection shows that you may run short of money late in retirement. That does not necessarily mean you cannot retire. It means your current combination of assumptions may not produce the outcome you want.

You can then ask a much more useful question:

What can I change to make my retirement plan stronger?

That question turns retirement planning into a process of improvement rather than a one-time pass-or-fail test.

If you are starting from the beginning, How to Create a Financial Freedom Plan provides a useful foundation for building your overall plan.

The 10 Ways to Improve Your Retirement Plan

1. Save more
2. Start saving earlier
3. Spend less
4. Retire later
5. Increase your income
6. Optimize your taxes
7. Improve your withdrawal strategy
8. Review your investment portfolio
9. Use tax-planning strategies such as Roth conversions or RRSP drawdown strategies
10. Test your plan and make adjustments

These strategies do not all have to be used. The right combination depends on your circumstances, goals and priorities.

1. Save More

The most obvious way to improve a retirement plan is to increase the amount you save.

Additional savings can help in two ways. First, you accumulate more assets. Second, those additional assets may have more time to grow before you need them.

Even a relatively modest increase in annual savings can become significant over a long period because of investment compounding.

Consider someone who increases annual retirement contributions by $5,000. The immediate impact is simply $5,000 more saved. But if that money remains invested for many years, the eventual impact can be substantially larger.

Saving more does not necessarily mean dramatically changing your lifestyle. You might increase contributions gradually as your income rises, direct bonuses toward retirement savings or reduce spending in a few categories that matter less to you.

The important thing is to understand how additional savings actually affect your retirement projection.

2. Start Saving Earlier

Time is one of the most powerful resources available to a retirement saver.

Money invested earlier has more time to potentially grow and compound.

This means someone who starts saving at 25 may have a very different path from someone who starts saving at 45, even if both eventually contribute similar amounts.

Starting earlier also gives you more flexibility later.

A person who builds a strong investment base early may have more options to reduce contributions temporarily, change careers, retire earlier or handle unexpected expenses.

Of course, not everyone has the opportunity to start early. If you are already in your 40s, 50s or 60s, that does not mean your retirement plan cannot be improved.

It simply means you may need to use a different combination of strategies.

If you are interested in accelerating financial independence, see How to Reach Financial Freedom Faster.

3. Spend Less

Spending is one of the most powerful variables in retirement planning.

Reducing retirement spending can lower the amount of income your portfolio needs to provide every year.

It can also reduce the amount of savings you need to accumulate before retirement.

For example, someone targeting $100,000 of annual retirement spending has a substantially different financial requirement from someone targeting $60,000.

However, reducing spending should not mean creating a retirement lifestyle you do not actually want.

A better approach is to identify which expenses provide the most value to you and which could be reduced without significantly affecting your quality of life.

Housing, transportation, travel, subscriptions, dining and other discretionary expenses can all be reviewed.

For more on this topic, read How Much Should I Spend in Retirement?.

4. Retire Later

Working longer is another powerful retirement-planning lever.

Retiring later can improve your financial position in several ways at once.

• You may save additional money.
• Your existing investments may have more time to grow.
• You may have fewer years of retirement withdrawals.
• You may receive larger pension or government benefits depending on the program and timing.
• You may have additional time to pay down debt.

This is why changing your retirement date by only a few years can sometimes have a surprisingly large effect on a retirement projection.

Retiring later does not necessarily mean abandoning your retirement goals. You could also consider a phased approach, such as moving from full-time work to part-time work before fully retiring.

If you are deciding between saving more and retiring later, see Should I Save More or Retire Later?.

5. Increase Your Income

Improving your income can create additional room for retirement savings.

This could involve negotiating a higher salary, changing employers, developing new skills, starting a business, earning consulting income or taking on additional work.

The important point is that additional income can affect your retirement plan from multiple directions.

You may be able to save more today, pay down debt faster and potentially increase future retirement benefits.

Additional income during retirement can also be valuable.

For example, earning $15,000 per year from part-time work could reduce the amount you need to withdraw from investments by $15,000, before considering taxes.

This is particularly useful for people pursuing early retirement or financial independence.

6. Optimize Your Taxes

Retirement planning is not only about how much money you have. It is also about how much of that money you can actually use.

Taxes can affect the amount of income available to you and the amount you need to withdraw from your accounts.

Different account types can have different tax characteristics, and the timing of withdrawals can matter.

For example, taking large withdrawals from taxable retirement accounts in one year may produce a very different tax result from spreading withdrawals across several years.

In some situations, it may make sense to withdraw or convert funds earlier than you initially planned. In others, preserving certain tax-advantaged assets may be more beneficial.

Tax planning should therefore be part of the retirement plan from the beginning, rather than something added after the investment strategy is complete.

Learn more in How Taxes Affect Your Retirement Plan and Financial Freedom.

7. Improve Your Withdrawal Strategy

Building a large portfolio is only one part of retirement planning. Eventually, you need to turn that portfolio into income.

The order and timing of withdrawals can affect taxes, investment growth and how long your assets last.

You may have several different account types, each with different tax characteristics.

Instead of automatically withdrawing the same percentage from every account, consider how your withdrawals interact with:

• Your target income
• Your tax brackets
• Government benefits
• Pension income
• Required withdrawals
• Investment growth
• Future spending needs
• Your spouse or partner's income and assets

A withdrawal strategy should also be flexible. The ideal approach in one year may not be the ideal approach several years later.

Your retirement plan should therefore allow you to evaluate different withdrawal strategies rather than assuming one fixed formula will work forever.

8. Review Your Investment Portfolio

Your investment portfolio needs to support both growth and withdrawals.

Before retirement, your primary focus may be accumulating assets. After retirement, the challenge changes because you are potentially taking money out while still relying on the remaining portfolio to grow.

Review whether your investment strategy is appropriate for your time horizon, risk tolerance and income requirements.

This does not mean simply chasing the highest possible return.

Higher expected returns often come with greater risk. A portfolio that produces strong average returns but experiences severe losses at an unfortunate time can create problems for someone who is already withdrawing money.

Your investment strategy should therefore be considered together with your retirement income strategy.

9. Use Tax-Planning Strategies Such as Roth Conversions or RRSP Drawdown Strategies

Tax planning becomes particularly interesting during the years between leaving work and receiving all of your retirement income.

During these years, you may have an opportunity to intentionally manage taxable income.

Roth Conversions in the United States

For eligible U.S. taxpayers, a Roth conversion can move money from a traditional retirement account into a Roth account, generally creating taxable income in the year of the conversion.

The potential benefit is that money moved into a Roth account can receive different future tax treatment, subject to the applicable rules.

The opportunity for a conversion may be particularly interesting during years when taxable income is relatively low.

However, Roth conversions are not automatically beneficial. The tax cost of the conversion, future tax rates, other income, government benefits and the individual's broader financial situation all matter.

RRSP Drawdown Strategies in Canada

Canadian retirees may face a similar planning question involving RRSP assets.

Rather than waiting until later retirement years to withdraw large amounts from an RRSP or its converted RRIF, a retiree may consider intentionally drawing down registered assets over time.

This is sometimes referred to as an RRSP meltdown or RRSP drawdown strategy.

The objective can be to manage taxable income across retirement rather than allowing a large registered account to create significant taxable withdrawals later.

The potential effects on government benefits, taxes, estate planning and future income all need to be considered.

These strategies illustrate an important principle: retirement planning is about timing as well as totals.

The best tax strategy depends on the individual's circumstances and applicable tax rules, so these decisions should be evaluated carefully and, where appropriate, with a qualified tax or financial professional.

For a broader look at building tax-efficient retirement income, see How to Create a Tax-Efficient Retirement Income Plan.

10. Test Your Plan and Make Adjustments

The final way to improve your retirement plan is to test it.

This may sound obvious, but many retirement plans are built around one set of assumptions:

• One retirement date
• One investment return
• One inflation rate
• One spending target
• One life expectancy

Real life is unlikely to follow that exact path.

Instead, test different possibilities.

What happens if you retire earlier? What if you work longer? What if investment returns are lower? What if inflation is higher? What if you spend more during the first decade? What if you live longer? What if you downsize your home?

Testing can reveal which assumptions have the biggest impact on your retirement outcome.

Read Why You Should Test Your Retirement Plan Before You Retire for more on this approach.

Your Retirement Plan Has Multiple Levers

One of the most encouraging things about retirement planning is that you usually have more options than you initially realize.

Imagine that your initial projection shows that you cannot comfortably retire at 55.

That does not necessarily mean you need to give up on the goal.

You could potentially:

• Save more over the next several years
• Reduce your planned retirement spending
• Retire at 57 instead of 55
• Earn part-time income after leaving full-time work
• Improve your investment strategy
• Optimize your withdrawal strategy
• Manage taxes more effectively
• Change your housing plans

The important thing is to identify which levers have the greatest impact on your specific situation.

Some Changes Are More Powerful Than Others

Not every improvement has the same effect.

Suppose your retirement plan is short by $100,000. You could spend months trying to improve your investment return assumption by a fraction of a percentage point.

Or you might discover that retiring two years later has a much larger effect.

Similarly, reducing retirement spending by $10,000 per year may have a greater long-term impact than trying to generate a slightly higher investment return.

This is why it is useful to model different changes rather than relying on intuition.

A retirement planning tool can help you identify which decisions actually move the result.

Government Benefits Are Part of the Equation

Retirement income may include government benefits that begin at different ages and have different rules.

In the United States, this may include Social Security. In Canada, it may include CPP and OAS.

The timing and amount of these benefits can influence how much your investment portfolio needs to provide.

That means you should not evaluate your investment portfolio without also considering your expected retirement income.

For more information, read CPP, OAS and Social Security: How Government Benefits Affect Retirement Planning.

Your Home Can Also Be a Retirement Planning Lever

Housing can have a major effect on retirement.

Your home may represent a substantial portion of your net worth, but that does not necessarily mean it provides retirement income.

You may decide to remain in your home, downsize, move to a lower-cost location, rent instead of own or use other property as an income-producing asset.

Each decision can affect both your assets and your ongoing expenses.

See Does Your House Count Toward Retirement? Home Equity and Financial Freedom for a deeper discussion.

Improve Your Plan Before You Need It

One of the biggest advantages of planning early is that you have more options.

If you discover at age 40 that you need to save more, you have decades to respond.

If you discover at age 60 that your retirement income is not sufficient, your options may be more limited.

This does not mean that retirement planning becomes useless later in life. It means that early planning gives you more time to make changes.

A retirement plan should therefore be viewed as an early-warning system as much as a retirement calculator.

PLAN. IMPROVE. TEST. CONFIRM. REPEAT.

Improving a retirement plan fits into a simple process:

1. PLAN. Build a realistic picture of your income, spending, savings, investments, taxes and retirement goals.
2. IMPROVE. Identify the changes that could strengthen your financial position.
3. TEST. Model different retirement ages, spending levels, investment returns, tax strategies and other scenarios.
4. CONFIRM. Determine whether the resulting plan provides the level of confidence you are looking for.
5. REPEAT. Update your plan as your circumstances, goals and assumptions change.

The goal is not to create a plan that can predict the future perfectly.

The goal is to create a plan that helps you make better decisions today.

How Retirementize Can Help Improve Your Retirement Plan

Retirementize is designed around the idea that retirement planning should be interactive.

Instead of looking at savings, income, taxes or housing separately, you can bring the major pieces of your retirement picture together.

You can build a plan that includes:

• Income
• Retirement spending
• Investment accounts
• Pensions
• Government benefits
• Taxes
• Housing and real estate
• Retirement timing
• Changing financial assumptions
• What-If scenarios

Once the plan is built, you can change assumptions and test decisions.

That means you can move beyond asking whether your retirement plan works and start asking what would make it work better.

That distinction is important.

A retirement plan is not simply a prediction. It is a tool for decision-making.

Fun Facts About Improving a Retirement Plan

Continue the Financial Freedom Series

This article is part of the Retirementize financial freedom and retirement planning series.

If you are working toward an earlier retirement, continue with Can I Retire Early? How to Know If You Can Afford Early Retirement.

You can also explore How to Reach Financial Freedom Faster and Should I Save More or Retire Later? to compare some of the most important ways to accelerate your progress.

Once you have made improvements, do not stop there. Learn why you should test your retirement plan before you retire and later stress-test your retirement plan against less favorable circumstances.

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